Confidential information may be anything from a concept or business idea to a formula or plan to make something. As this type of confidential information may be difficult to protect under laws relating to other forms of intellectual property, such as trademarks or copyright, a confidentiality agreement may be an appropriate form of protection for the confidential information.
When should a confidentiality agreement be used?
A confidentiality agreement should be used in any situation where you are disclosing information you do not want others to know.
Common situations in which confidentiality agreements are used include:
negotiations for sale of business, where a seller of the business may allow a potential purchaser to inspect accounts and other financial information relating to the business, for the purposes of deciding whether to purchase the business;
joint venture or partnership, where parties considering an alliance to benefit both of them may each reveal business information or secrets to the other for the purpose of deciding whether to enter into a business relationship together, or having done so, to share information for the benefit of each.
new business idea or concept, where a person with a business idea or concept approaches another as a potential partner, or for finance, for technical support or otherwise.
a part of an employment contract to prevent an employee from making unauthorised use of employer's information during the period of employment and after employment ceases.
What is in a confidentiality agreement?
Generally, a confidentiality agreement will:
specify the parties to the agreement;
describe the confidential information to be disclosed;
describe the purpose for which confidential information is disclosed, and the use to which it may be put;
require the recipient of confidential information to keep it confidential;
contain a time period for which information will be protected;
will prohibit the recipient from using the information for its own benefit,to the detriment of the disclosing party; and